Company

Ethics and Compliance

Transparency in Supply Chains

The California Transparency in Supply Chains Act of 2010 became effective in California on January 1, 2012, and the UK Modern Slavery Act became effective in the UK on March 26, 2015.

These laws were each designed to increase the amount of information manufacturers and retailers make available to customers and consumers regarding their efforts to address the issue of slavery and human trafficking.

As is stated in the Cummins Code of Business Conduct:

"Customers, employees, shareholders and communities have depended on Cummins to do the right thing for almost 100 years. Our Company’s strong ethical reputation and business success have been built on doing what is right and doing what we say we will do. That is why integrity is one of our Company’s core values. . . . Our Code of Business Conduct forms the backbone of our commitment to ethical behavior."

Cummins has a comprehensive Code of Business Conduct which includes provisions prohibiting forced or child labor. We require all employees to comply with, and have training on, the Cummins Code of Business Conduct. Included in our Code of Business Conduct is the following language:

"...We support human rights around the world, and will comply with all applicable laws regarding the treatment of our employees and other stakeholders. We will not tolerate child or forced labor anywhere and we will not do business with any company that does. . . . Our commitment to fair treatment also extends to our joint ventures, suppliers and other partners..."

Through our Supplier Code of Conduct, we make sure our suppliers and partners understand our values and treat their stakeholders in a way that is consistent with those values. The Supplier Code of Conduct provides, in pertinent part, as follows:

NO FORCED CHILD LABOR

Suppliers must not use slavery or involuntary labor of any kind, including prison labor, debt bondage, or forced labor by governments and suppliers must not be involved in human trafficking. Suppliers must not use corporal punishment, physical or psychological abuse, threats or violence, or other forms of physical or mental coercion. There must not be unreasonable restrictions on the ability of employees to enter or exit the workplace.”

SPECIFIC CALIFORNIA DISCLOSURES:

Verification of Product Supply Chain. Cummins suppliers are required to sign a response form (“SCOC Response Form”) agreeing to comply with the Supplier Code of Conduct (“SCOC”), which includes a prohibition against forced or child labor, or affirmatively set forth the reasons why they are unable to comply. Cummins reviews the SCOC Response Form to ensure that it meets the intent of the SCOC. If Cummins concludes that the supplier is not in compliance based on the SCOC Response Form, Cummins will work with the supplier to (a) develop a plan to attain compliance, or (b) work on an exit strategy. If the Supplier agrees to take the appropriate steps to comply, Cummins will monitor the supplier’s actions until all those required have been taken.

Supplier Audits. To verify that suppliers remain in compliance with SCOC, Cummins conducts an audit during supplier visits in China, India, Brazil, Mexico, South Africa and Eastern European countries (including Russia). The informal audit is conducted by Cummins personnel and the supplier is not notified before or during the audit. Cummins management will contact the supplier’s management to inform them of all negative audit scores and Cummins will develop a corrective action plan with the supplier. If any inappropriate behaviors or conditions viewed as systemic or critical are observed during the audit, the situation is reviewed with the Cummins legal department for appropriate action.

Supplier Agreements. Cummins requires suppliers that make up the top 80% of purchases to sign an SCOC Response Form or a contract that contains SCOC language, which requires suppliers to comply with applicable laws and regulations and includes the prohibition against the use of forced or child labor of any kind.

Accountability Standards and Procedures. As our Code of Business Conduct states, “. . . [w]e will not tolerate child or forced labor anywhere and we will not do business with any company that does. . . .” Employees and contractors have multiple avenues to raise concerns should a fellow employee or contractor be suspected to be in violation of this core ethical principal. These avenues include contacting their supervisor, human resources or calling the ethics helpline or report through a specially designed ethics website. Cummins does not tolerate retaliation and no action will be taken against an employee or contractor because he or she reported a concern.

Similarly, Cummins SCOC sets forth our expectations for suppliers. An employee or contractor who identifies a potential violation of the SCOC (outside of the Supplier Audit context described above) should report the information to his or her management, the purchasing department or the legal function so that Cummins can investigate the matter and take appropriate action.

Supply Chain Training. Cummins trains employees responsible for supply chain management on Corporate Responsibility. We require all Cummins employees to comply with, and have training on, the Cummins Code of Business Conduct, which includes provisions prohibiting forced or child labor.

Due diligence processes for slavery and human trafficking
As part of our initiative to identify and mitigate risk we have in place systems to:
• Identify and assess potential risk areas when considering taking on new suppliers and regularly review our existing supply chains.
• Mitigate the risk of slavery and human trafficking occurring in our supply chains.
• Monitor potential risk areas in our supply chains.
• Protect whistle blowers.

Training:
We have zero tolerance to slavery and human trafficking. To maintain awareness and ensure a high level of understanding of the risks of modern slavery and human trafficking in our businesses our Code of Business Conduct is available on the Intranet.

Specific United Kingdom Disclosures:
Cummins’ UK presence is comprised of five manufacturing sites and additional 14 associated sites including parts reconditioning, distribution and administration. We employ circa 5000 employees in the UK. Cummins imports approximately £650m of parts and materials into the UK for use related to our businesses, 25% of which is imported from the EU and the remaining 75% from the rest of the world.

Due to the global nature of the Cummins presence, we have not implemented UK-specific processes in relation to modern slavery or human trafficking as we believe our global processes are effective in identifying and combating these risks within our global supply chains.

This statement is made pursuant to section 54(1) of the Modern Slavery Act 2015 and constitutes our Group’s slavery and human trafficking statement for the financial year ending 2016.